Chapter 7: The Rich
The last three chapters dealt with the type of externalities that we feel when someone else is poverty-stricken or in pain or any kind of distress. It is certainly true that most people have this type of feeling and that they at least occasionally do something about it. In this chapter we will turn to the mirror image of this, the discomfort we may have when we feel when someone else has too much. I might, for example, feel you should give me some of your money.1 Transfers and aid within a society or between societies can be a consequence of both of these types of externalities although to some extent they tend to cancel each other out. I can be sincerely sorry for someone who is ill while at the same time feeling that it would be desirable that some of his wealth be transferred to me. If we look at existing governments we ﬁnd that they engage in both types of transfers. In some cases they will aid the poor and in other cases milk the rich. Of course the money taken from the rich may be used to aid the poor. In both cases, we are dealing with an externality which depends upon the well-being of someone else. Further, what we feel, and how strongly we feel it, may be deeply aﬀected by connections or simple distance. I used to run an experiment when I was in Tucson, where most of the political science department were...
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